Impacts of cultural risk factors on project success in the UAE construction industry

Abstract

Industrial risk management is an area of interest in business and management research. Construction is a risky and dynamic industry that is particularly prone to a variety of risks and uncertainties. The nature of these risks may depend on particular projects and can significantly vary from country to country. Therefore, the essential goal of research in identifying and characterising risks in construction is two-fold, involving (1) the identification and characterisation of any general trends, risks and mitigating strategies that are common in different countries and extend over a variety of construction projects in one or more countries; and (2) the identification and characterisation of any particular construction risk in a given country or even for a given project and understanding any variability of risks for different projects or countries. The detailed analysis of risks and risk factors associated with both these aims is essential for the successful development of the construction industries that constitute a significant part of the world economy. The major focus of this paper is the analysis and characterization of cultural risks in the construction industry in the United Arab Emirates (UAE). The unprecedented construction boom in the UAE since 1971 has caused rapid and extensive growth in its construction industry. However, this rapid growth and its sustainability are threatened by a variety of factors including significant cultural issues associated with the traditional Arabic culture and the unprecedented diversity of the workforce in the UAE, as more than 80% of workers are expatriates from different parts of the world. This creates a unique business environment in the country whose successful development largely underpins the economic progress in the Middle East and elsewhere. The analysis of cultural risks in the UAE construction industry was conducted using a specially designed and validated survey instrument. There were 237 participants of the study, all holding senior engineering or managerial positions in companies associated with the construction industry in the UAE. The analysis was based on the identification and quantitative characterization of the constructs associated with the cultural risk factors and generalized structural equation modelling to characterize the direct and indirect effects of these constructs on the success of construction projects. All outcomes were adjusted to socioeconomic and company variables. Among the mediating constructs, External Risks (involving corruption, government regulations, market demand and differences between stakeholders) and Communication (involving communication issues between the parties to the contract, employers and employees) dominated Internal Risks, which were generally perceived as less important. The cultural factors produced significant impacts on these mediating constructs that, in turn, affected project success. Only two UAE cultural aspects were found to have positive impact on project success. These were differences in educational backgrounds and a more stringent attitude to time among Emiratis that people from Western countries. All other specific cultural aspects were found to have significant negative impacts. The two different constructs associated with the existing cultural aspects in UAE were identified as UAE Culture and Cultural Diversity. Both of these constructs were shown to have significant impacts on project success, but only through the mediation of the other three constructs of Internal Risks, External Risks and Communication. In particular, it was demonstrated that the cultural diversity issues have twice as strong an impact on the success of construction projects in UAE than the general cultural issues in UAE. Therefore, the issues of cultural diversity should be given priority in any attempts to mediate construction risks and improve productivity in the industry.